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Florida Gas Transmission Company, LLC v. Texas Brine Company, LLC

Court of Appeals of Louisiana, First Circuit

December 6, 2018


          On Appeal from the 23rd Judicial District Court Parish of Assumption, State of Louisiana Trial Court No. 34316 The Honorable Thomas J. Kliebert Jr., Judge Presiding

          Leopold Z. Sher James M. Garner Peter L. Hilbert Jr. Neal J. Kling Jeffrey D. Kessler New Orleans, LA and Robert Ryland Percy III Gonzales, LA and Eric J. Mayer Houston, TX Attorneys for Defendant/Appellant Texas Brine Company, LLC

          Christoffer C. Friend Susan R. Laporte Meghan E. Smith New Orleans, LA and Brad D. Brian (Pro Hac Vice) Bethany W. Kristovich (Pro Hac Vice) Los Angeles, CA Attorneys for Defendant/Appellee Occidental Chemical Corporation


          CRAIN, J.

         This suit arises from the sinkhole that developed in Assumption Parish in August 2012. Texas Brine Company, LLC, appeals a November 27, 2016 judgment denying its request for a preliminary injunction to enjoin arbitration proceedings. Finding the courts lack authority to decide the issues urged as to the injunction, we affirm.


         After being named a defendant in this suit, Texas Brine filed incidental demands asserting tort and contract claims against various parties, including Occidental Chemical Corporation ("Oxy") and Vulcan Materials Company. Texas Brine alleged that in 1975, Oxy, as owner of the land over the Napoleonville Salt Dome, leased to Texas Brine the right to produce salt from the land. In 1976, Texas Brine transferred its interest in the salt lease to Vulcan, [1] but remained operator of the brine production wells and related facilities pursuant to an Operating and Supply Agreement dated October 29, 1975 ("Operating Agreement"). The Operating Agreement was amended and restated in its entirety by Texas Brine and Vulcan on January 1, 2000 ("Amended Operating Agreement"). Oxy then acquired Vulcan's assets and assumed its obligations under the salt lease and Amended Operating Agreement.

         The Amended Operating Agreement contained an arbitration clause in Section 12.10. Pursuant thereto, Texas Brine and Oxy have been engaged in arbitration proceedings, while simultaneously litigating claims in court. According to a scheduling order issued by the trial court, contract claims are being arbitrated, while tort claims are proceeding in court.

         Texas Brine now claims Vulcan fraudulently induced it to enter the Amended Operating Agreement and the arbitration agreement contained therein by withholding critical information. Texas Brine asserts the fraudulent inducement vitiated its consent, making both the Amended Operating Agreement and the arbitration clause in Section 12.10, void ab initio. Arguing no enforceable arbitration clause exists, Texas Brine moved for a preliminary injunction to halt the arbitration proceedings until the court decides its fraudulent inducement claims.[2]Oxy countered that Texas Brine's fraudulent inducement claim could not be resolved in the courts and must be raised in the arbitration proceeding, citing this court's decision in Jasper Contractors, Inc. v., LLC, 11-0978 (La.App. 1 Cir. 5/4/12), 94 So.3d 123.

         The trial court held the arbitrators, not the court, must decide Texas Brine's challenge to the contract as a whole. However, drawing a distinction recognized by the Supreme Court in Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006), the trial court found any claim directed specifically to the validity of the arbitration clause should be decided by the court. After considering the evidence presented at the hearing, the trial court found Texas Brine failed to prove its consent to the arbitration clause itself was vitiated by fraud. Consequently, the trial court signed a judgment on November 27, 2016, denying Texas Brine's motion for preliminary injunction and refusing to enjoin the arbitration proceedings.

         Texas Brine now appeals, arguing the trial court erred in its determination that arbitration rather than court is the proper forum for resolving the question of whether an enforceable agreement to arbitrate exists between the parties.[3] (Brief p.3) It argues only a Louisiana court can define the requirements for a valid and binding contract under Louisiana law, and the courts must make the threshold determination as to the validity of the underlying contract giving rise to the arbitration proceeding. (Brief pp. 15-17) Texas Brine additionally argues it did, in fact, make a fraudulent inducement claim directed specifically to the arbitration provision, and the trial court erred in finding the evidence insufficient as to that issue.


         Arbitration is a matter of contract. AT&T Mobility LLC v. Concepcion,563 U.S. 333, 339, 131 S.Ct. 1740, 1745, 179 L.Ed.2d 742 (2011). Therefore, we begin our analysis with the language of the contract. See Buckeye, 546 U.S. at ...

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